Wednesday, April 13, 2011

Making Energy Plans

By Matthew Tester, Project Associate.

As energy markets evolve in coming years, some communities will be better off than others. Those with energy plans will be prepared to absorb the difficulties and generate real benefits for their residents.

AtMarket Street, we are continuing to watch the landscape for disruptive trends so that we can help our client communities capitalize. As I've previously mentioned on this blog, I have a keen interest in the future of energy – inputs, technologies, distribution, you name it – and what it will mean for our communities. The way I see it, there won’t be a more disruptive trend this century than the transition from fossil fuels to alternative energy sources. The local economic impact will be enormous, and without proper planning, it could be disruptive in all the wrong ways.

Recent developments have hinted further at the risks of a continued fossil fuel economy. Unrest in the Middle East and the nascent economic recovery have pushed gasoline prices close to $4 per gallon. Even without the immediate concerns about supply, the increased demand created by the global recovery will keep prices higher than the last two years have allowed. More and more energy analysts (and investment gurus, for that matter – see Warren Buffett) are subscribing to the Peak Oil contention that permanently declining production worldwide will squeeze costs in the near future. Shale gas is becoming more suspect as a viable mid-term alternative, as concerns about groundwatercontaminationand greenhousegas emissionsassociated with its extraction pile up.

I wrote in November about communities needing to think about their transportation investment decisions in light of these realities. I’m beginning to think that lens needs to be widened. And the more I think about it, the more I’m convinced of the wisdom of city- or metro-scale energy plans. The beauty of these plans is their versatility – they can be as wide or narrow in scope as the community can handle. Political and geographic realities will naturally shape the planning process. In some communities, these plans might cover every issue from climate change to job creation, and in others, they might focus on just a single government program.

There are a hundred indirect economic benefits that one might use to justify such a plan; I’m thinking instead of direct impacts. On Mac’s recommendation, I just finished readingMake It In America, by Dow CEO Andrew Liveris. He posits that Germany, a country with high labor costs, became the world leader in renewable energy systems (tops in photovoltaic cell production) in large part because they had a clear and demonstrated commitment to growing that sector – they had a national energy plan. The United States, which has no discernible national energy plan and has only timidly embraced renewables, has become far less competitive in this realm.

At the local level, the lesson is that manufacturers, researchers, and service providers associated with this massive growth sector are faced with much greater uncertainty and are less likely to invest in a given community if it has no energy plan. These interrelated businesses comprise one of the most promising growth engines in our economy. Almost every community we work in wants to know how competitive they are in energy technologies, green manufacturing, or some related sector. Having a plan that screams “We are prepared to invest in the future of energy” is one proven way to stand out from the pack. Wouldn’t you want to take your business where it’s welcomed?Some communities with energy plans include: